The Man Who Is Sure to Lose in November
By P.J. O'Rourke
Now that the results of "Semi-Super Tuesday" primary elections are in, we're beginning to know how this election will turn out.
Somebody is going to lose the presidential race in a big way. He isn't a candidate. He isn't even alive. But America is going to be a lot worse off without him.
The loser will be Adam Smith (1723-1790), the man who founded the discipline of economics, discovered the way economies work, showed how free enterprise creates wealth, and wrote The Wealth of Nations.
Donald Trump and Hillary Clinton have not read the book.
Trump is a demagogic "moneybags" with a rich kid's disdain for economics. Clinton is a famously grasping old wirepuller of a political hack who knows nothing about economics and couldn't care less, except when the billfold contents of her own designer handbag are involved.
And the worst thing about the two of them is the one thing on which they agree. They oppose each other about everything except one crucial economic issue: Both candidates are against free trade.
One of Trump's few well-defined policy positions (besides anti-immigrant nativism) is his promise to "bring manufacturing jobs back home where they belong" and "take back those jobs China is stealing."
Clinton has more policy positions than you can shake a stick at. But the populist blather of socialist nitwit Bernie Sanders has forced her to shake that stick at her own previous pro-free trade agenda. She has now turned against the Trans-Pacific Partnership, which she helped negotiate, and the North American Free Trade Agreement (NAFTA), which she helped her husband push through Congress.
Abolishing free trade won't make America better, it will just make America more expensive. Almost everything we buy will cost more. And foreign economies will be destroyed.
We'll be broke. They'll be poor. How is this a recipe for more jobs with better pay?
The Wealth of Nations is 1,000 pages long, but Smith's point can be summed up in one sentence: Wealth is created by the pursuit of self-interest, division of labor, and freedom of trade.
Any interference – domestic or international – with these economic fundamentals destroys wealth creation. Trump and Clinton promise to interfere with all three.
"Mercantilist" is the economic term for Trump and Clinton.
Mercantilism is the idea that a country gets rich by exporting more goods and services than it imports.
That would be true if a country were a lemonade stand. Or if money were a good or a service instead of a measure of the ever-changing value of goods and services.
Under mercantilism, government erects trade barriers to keep a country's citizens from getting the things they want from overseas. And government creates trade incentives to get a country's citizens to send the things they make to foreigners. The result is a trade surplus. The country accumulates a bunch of money.
Never mind that when people go to buy goods and services with the money, they find the goods and services have all been exported and the money is worthless.
Mercantilism was the dominant economic policy in the 17th century, when world leaders were (as they are becoming again) completely ignorant about economics.
The main reason Smith wrote The Wealth of Nations was to show that mercantilism is stupid.
Mercantilism confuses money with wealth.
As Smith put it, "Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods."
Book IV, Chapter I of The Wealth of Nations includes a wonderful passage about the nature of money. I quote it in slightly abridged form...
After the discovery of America, the first inquiry of the Spaniards used to be whether there was any gold or silver to be found in the neighborhood.
Likewise, Friar Carpino, a monk sent as ambassador from the king of France to the court of Genghis Khan, said that the Tartars frequently asked him if there were many sheep and cows in France.
The object of the two questions was the same. The Spanish and the Tartars both wanted to know if a country was rich enough to be worth conquering.
Among the Tartars cattle are the instruments of commerce and the measure of value. Wealth therefore consists of cattle as far as the Tartars are concerned. And wealth consists of silver and gold as far as the Spanish are concerned.
Of the two, the Tartar notion, perhaps, is nearest to the truth.
I don't expect either presidential candidate to read The Wealth of Nations. It has too many long words for Trump. And it contains such excellent arguments for economic liberty that perusing it might cause Clinton to collapse and wither away, leaving nothing but an empty pantsuit on the campaign stump.
However, maybe some small part of the meaning of what Smith had to say about free trade can be gotten across to the candidates in the form of a parable:
The Parable of Japan in the 1980s
Thirty years ago, American politicians, policy makers, and pundits were alarmed about America's trade deficit with Japan.
The Japanese kept giving us radios, TVs, stereos, and cars. In return, we kept giving them little green pieces of paper.
The Japanese were mercantilists. They refused to buy anything American-made except Michael Jackson audio cassettes. We didn't even make the valuable part – the cassette. This left the Japanese with a huge accumulation of little green pieces of paper.
According to mercantilist theory, this made Japan a rich and powerful nation.
Japan thought it was such a rich and powerful nation that, instead of buying things from America, the Japanese decided to buy America itself using their little green pieces of paper.
They bought office complexes, golf courses, and hotels. They bought Rockefeller Center. They bought Pebble Beach.
The Japanese bid up the price of American real estate until the bubble did what bubbles do.
By the 1990s, America had all the radios, TVs, stereos, and cars... and it had all the office complexes, golf courses, and hotels, too. America had Rockefeller Center. America had Pebble Beach. And America had all the little green pieces of paper.
Meanwhile, the Japanese had stuck their economy in a place where the Rising Sun never shines.
Regards,
P.J. O'Rourke